Types of Tax Audits: Grounds, Time Limits and Taxpayer Rights

A notice of a tax audit almost always causes anxiety — yet the law defines precisely which type of audit is possible, on what grounds, and how long it may last. It is worth understanding all of this before the inspectors arrive: the type of audit determines both the scope of your rights and the limits of the controlling authority’s powers. Below I set out the classification of audits under the Tax Code, the grounds and time limits for each of them, the right to refuse entry, and the situations in which the results of an audit call for a forensic economic examination.

Four types of audits under the Tax Code

The Tax Code of Ukraine (PKU) provides for four types of audit, and they must not be confused: each has its own subject matter, appointment procedure and scope of inspector powers.

Desk audit (Article 76 of the PKU)

A desk audit (kameralna) is conducted at the premises of the controlling authority — with no visit to the taxpayer, no order and no need for you to be present. Its subject matter is narrow: the data of the tax returns (calculations) you have filed, together with data from the electronic VAT administration system and the authority’s other electronic systems. In practice it is an automated reconciliation of your reporting — whether the return was filed on time, whether there are arithmetic discrepancies, whether the figures agree. A desk audit of return data is carried out within 30 calendar days following the filing deadline. No consent from the taxpayer is required — the very fact of filing is the ground.

Documentary scheduled audit (Article 77 of the PKU)

A scheduled audit is a known event in advance. It is conducted according to a plan-schedule published on the official website of the State Tax Service (DPS) by 25 December of the year preceding the audit year. Its frequency depends on the risk level of the taxpayer’s activity (high, medium or low). The key safeguard: you must be warned no later than 10 calendar days beforehand — sent or handed a copy of the order together with a written notice stating the start date. If you have not received these documents, a scheduled audit cannot begin.

Documentary unscheduled audit (Article 78 of the PKU)

This is the most conflict-prone type. An unscheduled audit appears in no schedule and is appointed by order only where a specific ground exists, and the exhaustive list of those grounds is fixed in Article 78 of the PKU. There is a separate section on this below, because this is where disputes over legality most often arise.

Factual audit (Article 80 of the PKU)

A factual audit is conducted at the place where the business is actually carried on — a shop, a warehouse, a catering outlet — and without warning. Its subject matter: compliance with the procedure for settlement operations (use of RRO/PRRO cash registers), cash discipline, the presence of licences and permits, the proper formalisation of employment relations with hired staff, and the circulation of excisable goods. It is appointed by order where the grounds set out in Article 80 exist (for example, information has been received about a breach of the settlement rules or the use of unregistered labour).

Grounds for an unscheduled audit: the list is exhaustive

The main thing to know about an unscheduled audit is that the authority cannot appoint one “just because”. Article 78 of the PKU contains a closed (exhaustive) list of grounds, and in the absence of at least one of them the audit is unlawful. In general terms, these grounds are:

• tax information has been received about possible violations, and the taxpayer failed to provide explanations and documentary support in response to a written request within the set period;
• the taxpayer failed to file a tax return or mandatory reporting on time;
• unreliable data were found in the returns submitted;
• an adjusting calculation was filed, or a negative value or a significant VAT budget refund was declared;
• a complaint was filed against a supplier for failing to issue a tax invoice or for breaching the procedure for registering it;
• a termination or reorganisation procedure has begun, bankruptcy proceedings have been opened, or an application for deregistration has been filed;
• the audit concerns controlled transactions (transfer pricing);
• information has been received about a tax agent evading taxation of the income it has paid out;
• the audit is conducted at the taxpayer’s own request.

This is an indicative, not a verbatim, list — for the exact wording and the full set of grounds, consult Article 78 directly. The practical conclusion is a single one: the first thing to do on receiving an order for an unscheduled audit is to find in it the reference to a specific sub-clause of Article 78 and assess whether that ground genuinely exists. Very often the procedural weakness of the authority’s decision is hidden precisely here.

How long an audit may last: time limits under Article 82

The duration of an audit is not unlimited — Article 82 of the PKU sets maximum periods depending on the taxpayer’s category. Exceeding these periods is a procedural violation.

Type of audit	Large taxpayers	Small business entities	Other taxpayers
Documentary scheduled	up to 30 business days	up to 10 business days	up to 20 business days
Documentary unscheduled	up to 15 business days	up to 5 business days	up to 10 business days

Each of these periods may be extended by decision of the head of the authority, but again within defined limits (for scheduled audits — by a further 15, 5 and 10 business days respectively; for unscheduled audits — by 10, 2 and 5). A factual audit has its own period — up to 10 days, with a possible extension of a further 5 days. A desk audit, as noted above, is limited to 30 calendar days for return data.

The right to refuse entry: Article 81 of the PKU

This is perhaps the most important point in practical terms. Article 81 of the PKU provides that DPS officials may begin an on-site documentary audit or a factual audit only if they present or send you:

1. an assignment to conduct the audit (with all its particulars — date, name of the authority, details of the order, the type and grounds of the audit, the inspector’s data, and the head’s signature secured by a seal);
2. a copy of the order to conduct the audit;
3. the service identification of the persons named in the assignment.

Failure to present (or send) at least one of these documents, or drawing them up in breach of the requirements, is the only lawful ground for refusing to admit the inspectors. Refusal of entry on any other basis is prohibited. The refusal is recorded in a formal act.

A sober assessment is needed here. The right to refuse entry is heavy artillery: an unjustified refusal can result in an administrative seizure of the taxpayer’s property. So a decision to refuse entry should be taken only where there is a real and obvious defect in the documents, ideally after consulting a specialist. But if the defect truly exists — record it in writing, because it will later become a strong argument in court.

Wartime restrictions and moratoriums

Martial law adds a separate layer of complexity. Over recent years, restrictions on tax audits have been in force, and the circle of permitted audits has changed repeatedly — through resolutions of the Cabinet of Ministers and amendments to subsection 10 of section XX (“Transitional Provisions”) of the PKU. At different periods, first factual, then certain documentary unscheduled, then scheduled audits were resumed for particular categories of taxpayer (in particular those dealing in excisable goods, gambling, or financial services).

Because of this volatility, there is no universal answer to “can they audit or not”: the current list of permitted audits and exceptions must be checked as at the date the order is received. In my practice this is one of the first points in testing legality: did the authority have the right to this type of audit at this moment, given the restrictions in force on that day? Sometimes the entire basis for a challenge is hidden precisely here.

When audit results call for an economic expert review

An audit ends with an act (or, where there are no violations, a certificate), and then with a tax assessment notice (podatkove povidomlennia-rishennia, PPR) stating the amount of additional charges. This is the moment to consider a forensic economic examination when:

• the authority’s calculations look questionable — VAT or corporate profit tax has been charged and you want to verify the methodology and arithmetic independently;
• there is a dispute over whether the transactions were real — where inspectors have treated operations as “goods-less” while the primary documents indicate the opposite;
• criminal proceedings have been opened under Article 212 of the Criminal Code of Ukraine (tax evasion) — such cases are investigated by the Bureau of Economic Security (BEB), and an economist expert’s opinion often becomes the decisive evidence of the size — or the absence — of the unpaid liabilities;
• a claim to the administrative court to annul the PPR is being prepared — a pre-trial economic study strengthens your position before the hearing.

Forensic economic examination in Ukraine is carried out under the Law of Ukraine “On Forensic Expert Activity” and the Instruction on the appointment and conduct of forensic examinations, approved by Order of the Ministry of Justice of Ukraine No. 53/5. It is ordered by the court or the investigator, while before going to court an economic analysis of the calculations can be commissioned as an out-of-court expert study. A forensic economist does not assess the legality of the authority’s decision — that is for the court. The expert answers a narrower but decisive question: are the controlling authority’s figures confirmed by the primary documents and the accounting data? Very often it is exactly this recalculation that collapses part of the additional charges.

Common taxpayer mistakes

Over years of work I see the same mistakes repeat from case to case.

• Admitting the audit without checking the grounds. Settled court practice proceeds from the premise that once a taxpayer has admitted the inspectors, it effectively loses the right to rely later on breaches of the appointment or entry procedure as a basis for annulling the PPR. Procedural defects in the appointment carry weight chiefly where the audit was not admitted. So the legality of the order must be assessed before entry, not after.
• Failing to produce documents that exist. If documents were in your possession but you did not produce them during the audit, the law allows it to be assumed that they did not exist at the time the reporting was drawn up (except in cases of seizure or documented loss). This sharply weakens your position. Existing primary documents must be produced — and the handover recorded in an inventory.
• Ignoring the DPS’s procedural violations. Missed deadlines, the absence of a proper ground, defects in the order or the assignment — all of this must be recorded in writing at the moment it happens, not “recalled” in court. Objections to the act, written comments and a record of violations are your future evidentiary material.

If you have received a notice or an order for an audit and are unsure whether its grounds are lawful, or whether the coming charges are correct, do not face the figures alone. I would be glad to help with an economic analysis of the calculations and with preparing a well-founded position for a challenge.